Football stars facing huge bills over tax avoidance

[ian1964 10,720]

Hundreds of wealthy investors in one of Britain’s largest tax avoidance schemes face having to pay out huge sums after the Supreme Court finally closed the door on a seven-year battle with Revenue & Customs.

 

Sir Alex Ferguson, the former Manchester United manager, and Sven-Göran Eriksson, the former England manager, were among a host of City figures and celebrities in Eclipse 35, a £1 billion film investment scheme with Disney that created tax relief worth £117 million.

 

After taking out loans to buy distribution rights to two Disney films, Enchanted and Underdog, Eclipse 35 swiftly leased the film rights back to the film producer for a payment spread over 20 years. If Eclipse 35 had worked, members could have enjoyed an average of £404,000 in tax relief on a personal investment of £173,000.

 

Britain’s highest court yesterday rejected Eclipse 35’s permission to appeal, hammering the final nail into a case that has seen investors defeated in four lower courts. All previous judges accepted HMRC’s argument, first made in 2009, that Eclipse 35 never carried on a trade, a prerequisite for investors to qualify for tax relief.

 

“I’m afraid we’ve heard nothing that persuades us that the Court of Appeal went wrong in this case,” said Lord Neuberger, president of the Supreme Court.

 

Nearly 300 members now face tax bills of multiple times their cash investment because of the leverage involved. One businessman has calculated that he faces a tax bill of between £5 million and £7 million on an original investment of £300,000. Others have accepted they will go bankrupt.

 

Tim Levy, founder of Future Capital Partners (FCP), which promoted Eclipse 35, said the financial crisis of 2008 had “changed everything” in terms of how film schemes were regarded.

 

“Between 2005 and 2007 the tax take was growing, the UK had a budget surplus, the economy was good, everyone was happy,” he told The Times.

 

“No one was worked up about these types of transactions. In the environment we are in today, they look like egregious and unacceptable tax avoidance schemes. But that’s not the way they were viewed.” HMRC has successfully shut down dozens of film investment schemes set up in the wake of incentives introduced in 1997 by Gordon Brown, the chancellor at he time. The schemes quickly migrated from supporting small British movies to financing some of Hollywood’s biggest blockbusters for the purpose of generating tax relief.

 

In 2012 Dave Hartnett, then the head of HMRC, described film schemes as nothing more than “scams for scumbags”. He predicted, accurately, that the Revenue would “clean up on film schemes over the next few years”.

 

The Financial Services Compensation Scheme has received more than 140 claims from investors alleging that they were misled by advisers.

 

Eclipse 35 was designed by HSBC, which earned about £8 million for devising the structure. HSBC licensed the scheme to FCP, which began marketing it in 2006 and promoted more than 30 film-financing partnerships.

 

The Eclipse 35 defeat could have far-reaching consequences on other film scheme cases, experts said. At least one appeal involving a tax scheme set up for Patrick Degorce, a hedge fund manager, had been put on hold pending the decision. However, since the Eclipse case only decided that the partnership was not trading, investors may challenge attempts by HMRC to claim back more in tax than they invested in cash.

 

http://www.thetimes.co.uk/tto/money/tax/article4732491.ece?shareToken=c440f4c9f90409be3d427f77078d6273

Edited April 14, 2016 by Frankie
Image removed due to uncertainty over source

[Frankie 8,531]

This should be very interesting given the links to such schemes from some footballing figures in this country.

[ian1964 10,720]

HMRC wins £635 million for the public in landmark case against Eclipse 35 avoidance scheme

 

 

 

Following a lengthy legal battle, the highest court in the land, The Supreme Court, today ruled in favour of HM Revenue and Customs, refusing the Eclipse Film Partners (No 35) LLP, permission to appeal last year’s Court of Appeal decision, protecting an estimated £635 million in tax.

 

Eclipse claimed to trade in film rights but was in reality a tax avoidance scheme, seeking to create substantial interest relief claims for investors.

 

People borrowed significant sums of money, at interest, to invest in Eclipse. The capital was supposed to be used by the partnership for trade, so the individuals could make interest relief claims against their other income.

 

The scheme operated by acquiring the rights to certain Disney films (Enchanted and Underdog) and licensed the same rights back to another Disney entity for a guaranteed income stream.

 

In reality, the borrowed money simply earned interest, which was then filtered through the partnerships to investors to cover the interest on their loans. This was dressed up as a trading transaction in order to enable the partners to claim tax reliefs.

 

David Gauke, Financial Secretary to the Treasury, said:

 

“This is another important victory for HMRC and shows that its compliance teams are effective in tracking down tax avoiders and retrieving money owed to the Exchequer.

 

“Tax avoidance doesn’t pay, and as this case proves those who try to avoid paying tax will be brought to justice.

 

“The Government has invested a further £800 million into HMRC to strengthen its ability to pursue tax dodgers and we will continue to pursue the minority who do not play by the rules.”

 

Jennie Granger, Director General of Enforcement and Compliance, HM Revenue and Customs, said:

 

“I’m delighted that the Supreme Court has confirmed the decision of the Court of Appeal in dismissing this case going any further. This is a fantastic victory for HMRC. It has significant ramifications for the 31 other Eclipse schemes and beyond.

 

“It just proves that tax avoidance doesn’t pay and highlights the danger that people face in getting involved in these schemes, which can see investors in a worse position than if they had not entered the avoidance scheme in the first place.”

 

Recent legislation, aimed at clamping down on avoidance, ensures that any tax in dispute is paid up front. These include the Follower Notice and Accelerated Payment Notices regimes, which has brought in more than £2.5 billion to date, and ensures the profits are taken out of avoidance

 

The public rightly expect HMRC to collect the right amount of tax at the right time, and we will pursue all cases which may contain features of avoidance to determine whether the arrangements need to be challenged.

 

There were 31 Eclipse partnerships that were designed to run for between 11 and 20 years from 2005/06. Eclipse Film Partners (No 35) LLP is the first of the partnerships to be taken to litigation.

 

This decision upholds the earlier Court of Appeal decision, concluding that there is no merit in this case being heard any further. As a result the findings of the Court of Appeal remain in place.

 

Investors were not eligible for interest relief and profits from the partnerships remain taxable. This puts the investors in a significantly worse position than if they had never invested in the scheme.

 

Notes to Editors

 

1. Eclipse Film Partners (No 35) LLP, with £117 million tax at risk, is the first of the partnerships to be taken to litigation.

 

2.The First Tier Tribunal, Upper Tier Tribunal and Court of Appeal all ruled in favour of HMRC. Eclipse 35 appealed to the Court of Appeal hearing was heard from 13 to 15 January 2015. The appeal was unanimously dismissed.

 

3.HMRC has collected £26.6 billion from compliance activities in 2014-15 alone, including from tax evasion, avoidance, fraud and organised crime – a 43% increase from £18.6 billion in 2011-12

 

4.Follow HMRC Press Office on Twitter @HMRCpressoffice

 

5.HMRC's Flickr channel http://www.flickr.com/hmrc.gov.uk

 

Issued by HM Revenue & Customs Press Office

 

HM Revenue & Customs (HMRC) is the UK’s tax authority.

 

HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.

 

http://www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/pressreleases/hmrc-wins-ps635-million-for-the-public-in-landmark-case-against-eclipse-35-avoidance-scheme-1373418

[limeburner 0]

There will be some interesting names pop up due to this decision.

Rather them than me-------hey ho shit happens when you gamble.

[ian1964 10,720]

Celtic and Rangers heroes among football stars facing financial ruin as HMRC send cash demands over tax avoidance schemes

 

06:00, 15 Apr 2016

Updated 06:52, 15 Apr 2016

By John Ferguson , Keith Jackson

 

SOME of Scottish football's biggest names are facing the threat of disaster as George Osborne's tough new rules has seen a clampdown on tax avoidance schemes used by the wealthy.

 

SCOTS football stars are facing a fresh threat of financial ruin from the taxman.

 

Cash demands totalling millions have been issued over tax avoidance schemes in a new blow following the Employee Benefit Trusts row surrounding Rangers.

 

The targets of the crippling new demands include some of the biggest names in Scottish football.

 

Recent legislation put in place by Chancellor George Osborne allowed the authorities to re-examine the legality of more than 1000 tax avoidance schemes used by the rich and famous.

 

Many of the schemes had been officially approved by HM Revenue and Customs but a retrospective change in the law means those who used them are now personally liable.

 

And this has led to hundreds of accelerated payment notices being served on former and current

professional footballers.

 

The bombshell demands have been dropped on at least three Scotland captains as well as a host of their international teammates.

 

Former big earners from across the Old Firm divide have been targeted, as well as at least one player who is likely to feature in Sunday’s Scottish Cup semi-final between the Glasgow rivals.

 

And a string of current SPFL stars from clubs across the country have been left urgently seeking legal and financial advice after being placed on taxman Hector’s hitlist.

 

The controversial APNs demand full repayment of all disputed amounts. And only once that money has been deposited can the sums involved be subject to appeal.

 

It is understood that hundreds of professional players on both sides of the Border are discussing joining forces to mount a joint legal challenge against the APN demands.

 

One current Scotland player said: “There is a feeling that we are being hung out to dry.

 

“Some of the boys are being hit with demands for sums of seven, eight or nine times what they invested into these schemes.

 

“Letters are coming through effectively saying, ‘You paid £1million into such and such a scheme a couple of years ago. We want £9million into our account right now. Pay up or we’re sending round the debt collectors to start seizing your assets. We’ll argue about the details later.’

 

“It’s terrifying and a lot of football players from the past and present are in a real state. No one wants to be declared bankrupt but some of the guys might have no other choice.”

 

A number of the schemes at the centre of the probe relate to investments made in the film industry. Down south, legendary Manchester United boss Sir Alex Ferguson, ex-Old Trafford defender Rio Ferdinand and former England manager Sven Goran Eriksson are among those facing potential bills for tens of millions of pounds.

 

On Wednesday, the Supreme Court ruled that HMRC are entitled to go after investors in one such film scheme, in a case worth a total of £1billion.

 

In 2012, Dave Hartnett, then the head of HMRC, described film schemes as “scams for scumbags”. But one former Scotland international who invested in such a scheme told the Record: “These schemes were approved by the authorities at the time. They were perfectly legal.

 

“But now the rules have been changed and the taxman has effectively gone to war with footballers and celebrities.

 

“They see us as easy targets. These letters are dropping through everyone’s box and they are frightening the life out of some of the boys.

 

“I spoke with one player the other day who got a demand for £80,000. He has until next week to come up with the cash. The guy is in a desperate state. He doesn’t have the money and knows the next step is likely to see him losing his house.

 

“But that’s just a minor example of what’s going on. The guy I’m talking about played at a decent level without ever being a huge earner.

 

“There are plenty of other more high- profile players facing demands for much more than £80,000. I know of one former player who has been hit for £750,000 and who is in complete panic.

 

“There’s no room for negotiation or compromise. It’s all heavy-handed, aggressive tactics from HMRC.”

 

HMRC believe many of the film investment schemes were designed specifically for tax evasion.

 

But another source – one of the most influential men in Scottish football –told the Record: “Some of the guys involved put money into a scheme that helped fund the movie Avatar so we’re talking about bona fide investments.

 

“They were told the tax incentives were perfectly legal. Some of them have letters from HMRC to prove it.

 

“But now the Government have completely moved the goalposts. I’ve spoken with a number of players who are at their wits’ end with worry.”

 

Tax expert Andrew Watters, of accountancy firm Thomas Egger, said: “These guys are probably going to have to cough up this money and, in some cases, that could mean selling houses and things like that.

 

“The big change we have seen in the last couple of years is the introduction of these accelerated payment notices.

 

“At the time a lot of footballers got involved in these film schemes, HMRC didn’t have the power to demand the tax they believe is owed up front.

 

“That meant you could tie the case up in court potentially for several years before anything would have to be handed over.

 

“Now taxpayers can be compelled to deposit the money before fighting their case, with the possibility that it will be returned years down the line if they are successful in court.

 

“If you have a sportsman who was making a lot of money when times were good, but made a couple of bad investments, then they are going to have to find that money.

 

“There is no doubt that this is placing a lot of people who got involved in these film schemes in a lot of bother.

 

“You can make a representation to HMRC to have an APN withdrawn, but if your argument is just that you don’t think you owe the money then HMRC won’t pay much attention to that.”

Gers icons face ruin in budget tax grab

 

THE Record revealed last month that a host of former Rangers stars could be hit with huge tax bills over Employee Benefit Trusts.

 

Ibrox icons including Barry Ferguson, Sir David Murray, Graeme Souness, Alex McLeish and Kris Boyd could be forced to pay back millions after George Osborne targeted tax dodgers in the Budget.

 

The Chancellor is cracking down on beneficiaries of “disguised remuneration schemes” – of which the EBTs introduced by Murray were a prime example.

 

More than 80 players, officials and staff at Rangers raked in more than

£47million from the scheme between 2001 and 2010.

 

Many of the foreign players have since returned to their home countries, which would create difficulties for HMRC in clawing back the cash.

 

Schemes like EBTs were outlawed with the 2011 Finance Act but billions of pounds in unpaid tax remain outstanding.

 

Murray Group, who owned Rangers, argued they were not liable for income tax and National Insurance because the players could have paid the loans back. But the tax authorities say the loans were never going to be repaid and the scheme was a brazen tax dodge.

 

Osborne’s new legislation means that, even if ongoing court action by the taxman fails to prove the EBTs were paid as a top-up to wages, Rangers oldco and the players can expect massive tax demands to pop through their letterboxes when the crackdown comes into force in just three years.

 

Read more at http://www.dailyrecord.co.uk/news/scottish-news/celtic-rangers-heroes-among-football-7758612#0F2XCIxOH77G2FHL.99